Cement firms foresee capacity usage at 99%

Capacity utilisation in the Indian cement sector is expected to touch an unprecedented 99 per cent in March.

"Companies increase their output because the industry demand peaks around March. However, demand in the last couple of months has been very firm. Therefore, we can expect a robust production to cater to March demand," a cement analyst said.

For the year ended March 31, 2004, the average capacity utilisation of the domestic cement industry was 82 per cent. "The high capacity utilisation in March will increase the annual average to over 85 per cent. The average capacity utilisation for the fourth quarter is likely to be around 92 per cent," said an analyst.

The industry clocked a growth of 10.4 per cent in January, 2005 While the central region witnessed a volume growth of around 25.9 per cent, the eastern region recorded a growth of 11.7 per cent.

"Even the usually depressed southern market posted a growth of 8.9 per cent in January sales. This reflects the narrowing of the demand-supply gap in a predominantly oversupply region," said a senior industry official.

Despatches in the western region grew by 7.8 per cent, while the north registered a growth of 3.8 per cent.

In February, despatches were severely affected by snowfall in the northern parts of the country. Major cement companies such as Grasim, UltraTech and Gujarat Ambuja Cement reported a drop in despatches owing to low pick.

However, the Associated Cement Companies posted a marginal increase of around 3 per cent in February sales. Analysts expect that the negative growth in the northern market has muted the overall industry growth.

But a leading Mumbai-based cement stockist said that pickup has resumed in the first week of March. "We are expecting good sales in the next few weeks. It is likely that companies will ramp up production to match the demand," he added.